Daniels v. Holtz

Decision Date18 February 2011
Docket NumberNo. 08–1729.,08–1729.
Citation794 N.W.2d 813
PartiesCurt DANIELS, Appellant,v.John HOLTZ; WSH Properties LLC; Navajo Associates, LLC, John Does and Jane Roes 1–5, Appellees,James Nervig and Brick, Gentry, Bowers, Swartz, Stoltze and Levis, PC; Appellees,Hunters Retreat, LLC, Appellee.
CourtIowa Supreme Court

OPINION TEXT STARTS HERE

Curt N. Daniels, pro se, Chariton, for appellant.Billy J. Mallory of Brick Gentry P.C., West Des Moines, for appellees John Holtz, WSH Properties, LLC, and Hunters Retreat, LLC.Kermit B. Anderson of Finley, Alt, Smith, Scharnberg, Craig, Hilmes & Gaffney, P.C., Des Moines, for appellees Nervig and Brick, Gentry, Bowers, Swartz, Stoltze and Levis, PC (Brick Law Firm).

STREIT, Justice.

“Won't you be my neighbor?” 1 Curt Daniels, the owner of a corporation sold at a sheriff's sale, seeks to have the sale set aside because, he argues, it lacked a just appraisal, the appraisers were not “disinterested householders of the neighborhood,” and the property sold for a grossly inadequate price. Iowa Code § 626.93 (2005). Daniels argues it is improper to adjust the appraisal of a corporation to take account of capital gains tax liability. Daniels also argues the sale should be set aside because it was unfairly or fraudulently conducted. The district court granted summary judgment in favor of defendants. We reverse the district court in part and hold Daniels raised a genuine issue of material fact regarding alleged inappropriate behavior at the auction that may have affected the selling price. In all other respects, we affirm the district court, including the propriety of discounting the value of the corporation in view of capital gains tax liability on the corporation's major asset.

I. Background Facts and Prior Proceedings.

This case arises from long-brewing hostility between Curt Daniels and John Holtz. Holtz operates two Arizona limited liability companies, WSH Properties, LLC and Hunters Retreat, LLC. Daniels previously operated two hog lots, one in Jasper County and one in Lucas County. Both properties were owned by an Iowa corporation owned and controlled by Daniels called Indian Creek Corporation (ICC). In 1998, WSH Properties and John Holtz purchased the Jasper County property out of a tax-sale auction after ICC failed to pay the property taxes on the Jasper County property. After the sale, Daniels removed certain items from the Jasper County property. WSH Properties brought a replevin suit against ICC and Daniels regarding the removed property, won a jury verdict finding it was entitled to possession of the disputed property, and was awarded $246,000 in damages.2 In 2001, the State of Iowa obtained a judgment of $95,000 against Daniels and ICC based on waste-control violations at the Jasper County property.

In 2006, the state assigned the $95,000 judgment to Hunters Retreat LLC, another company owned by Holtz, in exchange for a cash payment of $95,000. In order to execute on the judgment, Hunters Retreat filed a praecipe for issuance of a writ of general execution on the judgment seeking the sale of the “right, title, and interest of Curt Daniels individually and as owner in Indian Creek Corporation, including but not limited to any certificated or uncertificated stock ownership, corporate books and records regarding said Indian Creek Corporation.” The Lucas County Sheriff published and served notice of a sheriff's sale, setting the date for a public sale of ICC.

Pursuant to Iowa Code section 626.93, three appraisals of ICC were provided to the Lucas County Sheriff. ICC's main asset is a parcel of real estate consisting of farmland in Lucas County, Iowa. P.A. Henrichsen, an attorney and certified public accountant (CPA) with an office in West Des Moines, was selected by Hunters Retreat and provided an appraisal of ICC stock at $52,000. Henrichsen based his appraisal on 2005 bankruptcy schedules filed under oath for ICC by Daniels, which estimated the value of ICC at $104,000 ($952,000 in assets less $849,000 in liabilities). Henrichsen then adjusted the bankruptcy schedule to increase the value attributed to the land by $150 per acre, decrease the value for assets no longer in ICC's possession, decrease the value to account for a mortgage balance that was higher than reflected in the bankruptcy filing, and decrease the value based on the $246,000 WSH judgment. Leland Shelton, a licensed real estate agent with an office in Chariton, Iowa, was selected by Daniels and appraised the value of the ICC stock at $769,000. Shelton determined the only valuable asset of the corporation was 1219 acres of real estate that he valued at $1,643,821. He then discounted that amount based on two mortgages—one with a remaining balance of $319,617.53 and one with an original principal of $127,685.31—and the $246,000 WSH judgment.

Based on the disagreement between Henrichsen and Shelton, Wendy Sims, a CPA with offices in Des Moines and Pella, was selected by the Lucas County Sheriff to provide a third appraisal. Sims appraised the value of the ICC stock at $29,500. Sims's written appraisal valued 1225 acres of farmland at $1,592,500. Sims then subtracted known liabilities of ICC: an outstanding mortgage of $330,481.95, another outstanding mortgage of $175,000, the WSH judgment of $246,000, and $20,000 in estimated court costs for a pending appeal. This brought the property appraisal down to $821,018.05. Sims then applied a 25% reduction to the $821,018.05 based on an assessment of unknown liabilities that might exist within the corporation because Sims was unable to review any corporate books or records. Sims then noted a large potential tax liability that would occur on the sale of the property. ICC originally paid $420,000 for the property and Sims estimated the property was now worth $1,592,500. The increase in value is a taxable gain of $1,172,500, which would result in an estimated capital gains tax liability of $586,250 upon sale. After discounting the estimated tax liability, Sims concluded a just appraisal of the ICC stock was $29,500.

Prior to the scheduled sale of ICC, Henrichsen and Shelton had the opportunity to review Sims's appraisal. Henrichsen and Shelton both decided they agreed with Sims's valuation. Henrichsen wrote, “Sheriff Longley I agree with the 29,500 value” and signed his name. Shelton wrote, “I have review [sic] this appraisal and I agree with this” and signed his name.

At the sheriff's sale, John Holtz, on behalf of Hunters Retreat, and Monroe Branstad bid on the ICC stock. Holtz placed the highest bid at $110,000. After Holtz's bid of $110,000, the sheriff took a recess, and after the recess, Branstad informed the sheriff he would not bid any further. Branstad testified in a deposition that he planned to bid higher on the property but, “It made me apprehensive or nervous that Mr. Holtz kept saying that this thing has got so many things wrong with it that you don't want to touch it.” Branstad also testified in a deposition that during the recess Holtz asked him what his limit was and offered to partner with Branstad on the property but refused to follow through on the partnership offer after the sale.

Daniels filed the instant suit against John Holtz and other entities and individuals somehow connected to the ongoing dispute between Holtz and Daniels, alleging a variety of claims including conspiracy, fraud, denial of equal treatment, unjust enrichment, intimidation, slander, and abuse of process. Daniels asked the district court to declare the sheriff's sale void, enjoin the defendants from interfering with his leasehold interest in the property, and award him actual and punitive damages. The defendants moved for summary judgment. Daniels moved to amend his petition to add nine causes of action, including deceit and collusion by the parties and their attorneys. The district court granted the defendants' motions for summary judgment and denied the motion to amend.

Daniels sought review. The court of appeals found the sale did not have a “just appraisal” as required by statute because the appraisers should not have factored in the potential capital gains tax liability. The court of appeals denied Daniels's other claims of error. Both defendants and Daniels seek further review.

II. Scope of Review.

We review a district court grant of summary judgment for correction of errors at law. Parish v. Jumpking, Inc., 719 N.W.2d 540, 542 (Iowa 2006). Summary judgment is proper only where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 1.981(3). This court reviews the record in the light most favorable to the nonmoving party. Lloyd v. Drake Univ., 686 N.W.2d 225, 228 (Iowa 2004). All legitimate inferences will be drawn in favor of the nonmoving party. Tetzlaff v. Camp, 715 N.W.2d 256, 258 (Iowa 2006). Denial of a motion to amend will only be reversed where a clear abuse of discretion is shown. M–Z Enters., Inc. v. HawkeyeSec. Ins. Co., 318 N.W.2d 408, 411 (Iowa 1982).

III. Merits.

Defendants sought summary judgment of Daniels's claims that the $95,000 assignment by the State of Iowa to Hunters Retreat was invalid and the sheriff's sale was illegal and invalid. The district court granted summary judgment in favor of defendants on all of Daniels's claims. Daniels raises three points on appeal. First, Daniels argues the district court should not have granted summary judgment regarding whether the sheriff's sale complied with statutory requirements. Second, Daniels argues the district court should not have granted summary judgment regarding whether the defendants engaged in acts that would require the sheriff's sale to be set aside. Third, Daniels argues the district court abused its discretion by failing to grant his motion to amend his petition.

A. Just Appraisal. A sheriff's sale may be set aside by a court “where the price obtained at a sheriff's sale is so grossly inadequate as to amount to...

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    ...is simply irrelevant in a net asset valuation since the valuation is necessarily premised on a hypothetical sale. See Daniels v. Holtz , 794 N.W.2d 813, 819 (Iowa 2010) ("Discounting capital gains tax liability is an accepted part of an asset-based methodology for valuation and has been app......
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